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Edited version of private ruling
Authorisation Number: 1011513207569
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Ruling
Subject: Payments in relation to a house
Question 1
Are you assessable on amounts paid by your relative for the mortgage, rates, insurance and all other expenses of the property when the title is in your name?
Answer
No.
Question 2
Are you entitled to a deduction for expenses relating to the property?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
The scheme commenced on
1 July 2009
Relevant facts
You obtained a loan and purchased a home as your relative could not obtain a loan in their own name.
Your relative lives in the home and pays the mortgage payments, rates, insurance and all other expenses of the property.
When the loan is fully repaid, the title of the property will be transferred to your relative.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that an Australian resident taxpayer is liable to pay tax on income derived from all sources whether in or out of Australia, during the income year.
Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income or a provision of the taxation legislation excludes it.
Taxation Ruling IT 2167 examines the situation where a property is let to relatives in a non-arms length transaction. Where the rent payment received amounts to a contribution to expenses and is not considered to be a reward to the home owner, but a private arrangement the rent is not considered assessable income. It then follows that no deductions are allowed as the nature of the income is private.
In your case, you have purchased a home with the title in your name as your relative could not obtain a loan. Your relative is paying the mortgage, rates, insurance and all other expenses of the property. The payments for the mortgage and other expenses are not ordinary income and will not be included in your assessable income. As the amounts are not assessable income, no expenses are allowed to be deducted against these amounts.
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